European stocks closed out the week with a modest gain on Friday, and government bonds rallied, after reports that European Central Bank officials are seriously weighing a further interest rate cut at their meeting at the end of the month.
The Stoxx 600 rose 0.4 percent to 622.9, bringing its gain for the week to 0.9 percent, the first weekly advance in three. Real estate and utilities, the sectors most sensitive to borrowing costs, led the session, each rising more than 1.5 percent. The DAX added 0.5 percent to close above 26,000 for the first time since August, the CAC 40 gained 0.3 percent and the FTSE 100 was flat.
The 10-year Bund yield fell five basis points to 2.57 percent, its lowest in three weeks, reversing most of the rise that had opened the week. Two-year yields dropped to 1.66 percent. Money markets now price a roughly 60 percent chance of a quarter-point cut on Oct. 29, up from 40 percent on Monday, and fully price a cut by December.
“The market has moved from ‘will they’ to ‘when,’” said Lorenzo Carfagna, a rates strategist at a Milan bank. “Inflation at 1.7 percent, oil in the 50s, the euro at 1.21: the doves have the better of the argument, and the leaks this week suggest they know it.”
The euro fell 0.4 percent to $1.210 as the shift in rate expectations weighed on the currency, though it remains up about 1 percent for the week. The Swiss franc eased slightly after what traders described as probable intervention by the Swiss National Bank on Thursday afternoon.
Brent crude rose 1.5 percent to $58.70 a barrel, trimming its weekly loss to about 2 percent. Gold slipped 0.5 percent to $4,688 an ounce after Thursday’s record but was still up 1.6 percent for the week.
Next week brings flash purchasing managers’ surveys for the euro zone on Thursday and the first large batch of third-quarter earnings from European automakers and consumer goods companies, which analysts expect to show the strain of the stronger currency on exporters.
A version of this article appears in print on Oct. 12, 2026, Section B, Page 5 of the European edition with the headline: European Shares End Week Higher as Bunds Rally on Rate Cut Expectations.
